MAMSI's earnings flat in fourth quarter Higher administrative costs are blamed

Health care

March 01, 1996|By M. William Salganik | M. William Salganik,STAFF WRITER

Mid-Atlantic Medical Services of Rockville yesterday reported flat fourth-quarter earnings as a jump in administrative expenses helped cancel out increased revenues.

The managed care company said it earned $16 million in the three months ended Dec. 31, compared with $15.6 million in the year-ago period.

On a per-share basis, earnings were 33 cents a share, unchanged from the corresponding quarter a year earlier and below the 36 cents a share expected by analysts surveyed by I/B/E/S International Inc.

Revenue for the quarter was $256 million, up 29 percent from the corresponding quarter in 1994.

"Earnings were below estimates but the top line growth was better," said Margo Vignola, an analyst at Merrill Lynch in New York.

MAMSI stock closed yesterday at $21.125, down 25 cents a share.

Revenue for the year grew 27 percent to $955 million. But administrative expenses, $101 million, were up 43 percent. Medical expenses, at $744 million, were up 24 percent, roughly tracking the growth in subscribers.

The increased expenses held growth in earnings for the 12 months to 11 percent, at $96.3 million, or $1.28 a share, compared to $86.6 million, or $1.15 a share, the previous year.

"1995 was a year of repositioning for MAMSI," said George T. Jochum, chairman, CEO and president. "We entered the Medicare market and paid our dues to get in. We established a direct sales force and paid our dues for the required organizational changes. While 1995 was not one of our best years, we are convinced that the repositioning will pay off in the future."

The company also announced it would allocate another $20 million to repurchase shares. This is on top of $40 million allocated last year but never spent.

"The announcement [of the repurchase allocation] was designed to make the stock go up, but it didn't work," said Ms. Vignola. "The expanded stock repurchase is ostensibly a way of boosting the shares, but it only works if you actually buy the stock."

As of the end of the year, MAMSI reported 1,483,400 subscribers, primarily in health maintenance organization (HMO) and preferred-provider organization (PPO) plans. That represents 23 percent growth in a year. Already, the number is 5 percent over that, and Mr. Jochum said the goal for this year is subscriber growth of 25 to 35 percent.

MAMSI said its provider network includes 1,198 hospitals and outpatient facilities and 21,077 physicians and "affiliate providers."

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